Banks defend against patent troll’s licensing demands

by attorneys Bob Stier, Pierce Atwood and Peter Hilbert, ABA Insurance Services

The Patent Troll Demands a Toll
The story begins in the summer of 2012, when scores of community banks started receiving letters from Automated Transactions LLC (ATL), claiming that its
patented inventions covered every ATM in the country, and threatening lawsuits for patent infringement if the banks did not pay to sub-license ATL’s 13 patents. ATL purposely kept license fees low, typically in the range of $10,000-$50,000, depending upon the number of ATMs at the target bank. Thus, no bank could realistically mount an independent defense to the spurious infringement claims because the cost to defend was so much greater than the cost to settle. Many of the banks figured they had no alternative, so more than 200 of them paid ATL to go away.

Community Banks Band Together
Pierce Atwood trial lawyer Bob Stier devised an alternative strategy to combat ATL’s aggressive tactics. Bob started digging into ATL’s questionable patent claims and he
quickly learned that an appellate court had invalidated the oldest and broadest of the patents and that rulings from other courts had limited other ATL patents. Bob concluded that the banks did not have to buy sub-licenses from ATL to continue to operate their ATMs. So in the fall of 2012, Pierce Atwood formed a joint defense group known as the National Automated Transactions Opposition (NATO). Each financial institution that was a member of NATO contributed to the defense fund based on the number of ATMs it had. Those contributions were always less than payment demanded by ATL for a sub-license, and significantly less than the cost to defend a typical patent infringement action. Together, the contributions were enough to mount a vigorous defense against ATL.

The NATO Group Fights Back
After 18 months, NATO had attracted over 100 financial institutions from seven states. Seven NATO members were named as defendants in the litigation. Most of the others had only received demand letters from ATL and a few chose to participate even though they hadn’t been directly threatened by ATL.

The first step was to persuade the courts to consolidate all seven cases before one judge in the District of Delaware, where the court had already found that one of ATL’s
patents was invalid. Once the cases were consolidated, Bob brought the fight to ATL, mounting a complete defense, pressing for an expedited case schedule, and
pursuing sanctions. Ultimately, ATL realized it could not overcome a well-organized, well-funded defense group like NATO and it capitulated. In January 2015, ATL dismissed all of its claims against the seven banks it sued and agreed it would never sue any of the other members of NATO.

Reflecting on the victory, Bob Stier noted that “it was gratifying to see how the strategy that we adopted and executed played out and successfully protected an entire
class of institutions from harassment by an unscrupulous patent troll.”

Feedback from the community banks was overwhelmingly positive with comments like, “It’s great to get such complete win in this case. This group idea ought to be a
template for others to follow in matters such as this,” and “Thank you so much for representing us in this case. I knew from the beginning that this was the right thing to do.”

About the Attorneys
Bob Stier is a Pierce Atwood trial attorney who has handled patent cases nationwide for nearly 35 years. He especially enjoys developing novel and cost-effective solutions to complex problems faced by banks and other clients.

Peter Hilbert is a Senior Attorney with ABA Insurance Services. Previously, Pete was a litigation associate at Jones Day, focusing on financial institution litigation,
complex commercial litigation and regulatory matters.